Systems that seem to defy our rational view of the world, like economies, ecologies, or even you or me. I'm forensic engineer Sean Brady and I'll be your host. Luis, welcome back on the show.

Thank you, Sean. It's a great pleasure to be back.

And the last episode you were on, you talked all about cities. And we talked about how cities work and how some of the problems of cities. In this episode, we're going to have a, we hope is a wide ranging conversation where we talk about cities again. We talk about the economy. And we have spoken briefly before together about, I'm from Ireland, you're from Portugal. Both countries went through a huge economic change in our younger years. And we could look at those as purely economic. And we could try and write the maths for them. But when you put a complexity lens on it, particularly from a city's perspective, you get a different story.

Yes, absolutely. I think again, you have the embodied economy, so to speak. And by embodied, I mean embodied in people, individuals, the way they live, that should be pretty clear, right? That people have purely economic, people say they have more purchasing power, they consume and produce more and so on. So that's tangible. But then you have to take the next step. How do they do that? Where are they doing this? And so they often are doing this in a city, big or small, and within organizations, right? For firms, but also other organizations that allow the dynamics to be supported and work. And pretty soon you're having a conversation a little bit like we have in the last episode about the city having certain supporting structures, which are places to live, infrastructure services, that allow us to function and to dedicate time then to socioeconomic activity. And then we may choose to put the focus on the social economic activity. We shouldn't lose track of all the scaffolding that needs to be there to begin with. And then the economic set of interactions have their own structure, which are also very interesting. So what happens in cities when you go and start looking at larger cities, which as we discussed last time, tend to be more productive per capita, also more expensive per capita, is that you have a process of specialization that people do narrow with, what feels like narrow with job, to more specialized jobs, podcast, or scientists, et cetera. And so on. But many weird things, right? You can be like a brain surgeon or an opera singer, right? I mean, who called for that, right? But these things develop and they exist. And many other weird things that probably we don't even know about, but that people do and thrive doing. And then why did that happen? Right? So again, you go back to classical economics, where we have this broader sense of the embedding of the economy. And we observe this is also a perspective in complex systems of often called economic complexity, which also observes that richer places are more specialized and more where you have a lot of these specializations being more independent in the network. But this is just generally, you know, goes back to any observation about the fabric, if you will, the structure of a developed economy, a rich economy. So it's an interesting puzzle. Why exactly that happens? Why is it necessary? And this goes back, the explanation that followed a little bit in economics. But again, the Adam Smith basically describes, though not mathematically, is that as people are able to connect, as you decrease the costs of interaction, he's thinking a lot about transportation, but can also think in other ways. Then people are able to specialize. And as they specialize, they become better at what they do. They become a better cook, a better podcast for a better scientist or whatever, right? Whether if you're doing 100 things, you cannot be very good at any of them, which you have to do if you don't have anyone around you doing those other things that you're not doing. So in a city, this all becomes possible. In an larger city, because you have more people, more activities, it becomes deeper and deeper. And what's special about this from a modern perspective is that it's not only that it's possible in the sense that people have enough interactions that the things that they don't do anymore are done by others around them. So you can have a delicious meal always in a great city, even though none of us, me anyway, are a great cook. But that's great because somebody is, right? And that's just the obvious example that that goes with so many other things. So what's interesting, right, is that when I said, this person's a great cook, it really means that they have the better what they do. They have more information. They have maybe talent or experience. They allow them to get to that level of quality of what they can do. And the idea is that if you spend more time on something, it's inevitable, people are learning animals, and we get better things, right? If nothing else from experience, but of course, then we have formal channels to be educated and trying to do that better as well. And then we get tested, right? If we're a lousy cook in a great city, you toast, right? You have to go do something else. So all this contributes to a complicated network of functions that not only embeds all these functions in an interesting, independent way, but also promotes learning, promotes invention, promotes innovation, promotes great cooks and great everything. A friend of mine always says, they're great. So he says, you know, great, sick is a place where you can do whatever you want, but you have to do it exposive really well. So that happens, but what happens in a society like this, in an economy like this, is that there's more knowledge than in a society where each person has everything. And a lot of this has to do with the depth of that knowledge, that if a person does everything, every person is more or less the same, they're trying to do everything. But the depth of any dimension of that knowledge, how good you are as an entertainer or as a cook or as a researcher is much shallower. So there's no new knowledge or there's rarely new knowledge at that sense. You cannot really create a brain surgeon or an opera singer without a lot of supporting structure. So that's what happens. So these societies have a lot more knowledge, have a lot more complementarities in which people can service each other and export also to outside the city and outside the nation because they do something unique and desirable. And this is wealth. This is the way it works. It's a lot of it is about knowledge and social structure and things that people appreciate. So it's very tangible and go out and experience it because that's really what it is. That's development.